Tech Data UK boss on $750m Apollo investment plans, Synnex merger and chip challenges

In a wide ranging interview with CRN, Tech Data's UK MD David Watts lifts the lid on how Apollo will drive $750m into the business

What have been the most surprising or unexpected trends so far this year?

David Watts: The markets are good, but it's different for sure. It was different to last year and slightly different from expected. So the big changes we're seeing is that our enterprise business, so a lot of larger projects which really struggled last year because of lockdown, they're much more coming back on stream. So we're seeing really nice growth year on year, and in some areas back to parity for the year before. So we're seeing a really nice return to growth there. We were hoping for that, and that has come.

What's been a bit less expected is we have these incredible peaks around mobility solutions which includes notebooks, peripherals and everything related to security, clients and anything that gives you the opportunity to be more mobile. We really saw a great upsurge in that.

We we're wondering what would happen this year particularly because of chip shortages and how that's going to impact notebooks. There's definitely an impact, but we are still up year on year after a stellar peak last year. There's a feeling that it wasn't so much a peak, but a new high and all those trends seem to be continuing.

Thirty per cent of our business is software and cloud and that did incredibly well last year. We saw big movements to the cloud out of emergency necessity, amongst end user customers driving our customers who needed to move fast. That was good from our point of view, because we have great tools such as StreamOne, our cloud billing consumption platform. So we saw huge rates of utilization and new users of those products and that has absolutely continued.

Have some partners been more active than others during the pandemic, and how has that changed this year?

The channel has done pretty well during this period, I have to be careful not to generalise, but it has. Tech has been part of the solution; I've used the phrase before that it feels like the channel has been the fourth emergency service.

Our customers have been absolute stars, we've done our best to support them as we can. The one negative trend right from the start of the pandemic was the number of trading customers. The number of trading customers across Europe and the number of trading customers in the UK dropped by between 10 and 20 per cent, according to Context data of distribution sales through the channel. So, broadly speaking, you'd be looking at 10,000 customers going down to about 8,000 customers.

Now, those customers haven't disappeared and as far as I know they've not gone bust. We just have a lot of customers who are small consultancy companies who were just effectively not providing hardware or just going dormant for a period. The vast majority of those have come back. So that's the only big change we saw in the channel; a lot of consultancy-based SMB customers just going very, very quiet.

Apollo said it would invest $750m in Tech Data. Can you give us any details about what that will look like?

That journey has already started and the investment is twofold really. We've grown through acquisition, so we have various systems running internally, pretty seamlessly, but not as one system. And as is the case with a lot of companies, the skill of the internal workers is sometimes understanding the systems.

We're going to demystify that completely and have one interface, so when a customer calls they're going through one system and its much quicker - rather than having to run four or five subsystems. So that's the colleague experience improvement, which comes with a massive customer experience improvement.

On the external facing side, our platforms like our InTouch and SteamOne platforms will also change. We have two currently due to the acquisition of Avnet. Right now were running two platforms and they will come together. Again, that whole ecommerce experience will be seamless facing the customer, but will also enable this orchestration, whereby it's not just us taking our vendors product together with our customers, but now an MSP that's got an automation tool can add theirs, or a small dentist ISV can put theirs on there and everyone can trade together. That's what we're spending the money on.

What impact, if any, do you expect the Synnex merger to have on Tech Data's UK business?

There will be a new company at the end of it, but our strategies are very similar. Synnex are mostly not in Europe. They have a very small business in the UK, which actually doesn't compete with us at all. In terms of how we operate day to day in the UK, I don't think it'll make too much difference at all.

Do you see Tech Data's legacy business as an asset or an obstacle as you invest in cloud platforms?

From a global perspective, what Apollo saw in us is an opportunity to accelerate the platform element of the business in a way that they think is a shifting paradigm in the marketplace.

The view is that the distributor is an orchestrator of partnerships and that everyone comes to the platform, customers, vendors, and you can all trade your solutions together but build and consumed on one platform.

That's the vision that Apollo bought into and I think the reality is that, when platforms exist, they do win. And that's definitely our strategy.

But Uber and Airbnb didn't come with a load of their own cars or partnerships with car manufacturers or hotels and BnBs - they just created the platform. We've created a platform but we do have really strong vendor partnerships globally and we have hundreds of technical staff globally and we have loads of our own IP. So we're bringing a lot to the party rather than just bringing a disruptive model. Otherwise Amazon would just do what we do; they could do all of that - Amazon has a business marketplace - but presenting the platform isn't enough. It's the partnerships, history, the expertise, the technical ability.

So [Tech Data's history and legacy] is absolutely an asset. And I would say the key differentiator for success to have everything that we have behind the platform.

What are the main challenges of the chip shortage for you?

It's not just that there's a shortage. If you speak to the vendors, it's about getting clarity about the nature of the shortage. Because if you go from component assembly through to country, there are so many choices. You might have a shortage of components, but then the vendor still has to decide where the finished product goes. So they then have to prioritize. Now, it's very difficult for a vendor to say we're not going to prioritize government projects in the NHS, for example. But then these volumes are so massive, so what's available to smaller businesses? So it's very difficult to predict where the sources will be and who exactly it will affect. Every vendor has its own strategy too.

I think you'll also have end user customers who will have to make the choice to mix their estate up because ideally you'll have one build, one image, one laptop, and you refresh in cycles. Well actually, if your preferred vendor is going to be out of stock for six months and you've got new starters, you don't really have much choice.

That's the biggest uncertainty because so much is sold around the device. If the device isn't being sold then you're missing everything else as well. If you just knew that it was going to be equally 20 per cent down for every vendor in every channel, then it would be much easier to understand.